Claims and loss handling is the materialized utility of insurance; it is the actual "product" paid
for. Claims may be filed by insureds directly with the insurer or through brokers or agents. The
insurer may require that the claim be filed on its own proprietary forms, or may accept claims on
a standard industry form, such as those produced by ACORD.
Insurance company claims departments employ a large number of claims adjusters supported by
a staff of records management and data entry clerks. Incoming claims are classified based on
severity and are assigned to adjusters whose settlement authority varies with their knowledge and
experience. The adjuster undertakes an investigation of each claim, usually in close cooperation
with the insured, determines if coverage is available under the terms of the insurance contract,
and if so, the reasonable monetary value of the claim, and authorizes payment.
The policyholder may hire their own public adjuster to negotiate the settlement with the
insurance company on their behalf.
For policies that are complicated, where claims may be complex, the insured may take out a
separate insurance policy add on, called loss recovery insurance, which covers the cost of a
public adjuster in the case of a claim.
Adjusting liability insurance claims is particularly difficult because there is a third party
involved, the plaintiff, who is under no contractual obligation to cooperate with the insurer and
may in fact regard the insurer as a deep pocket.
The adjuster must obtain legal counsel for the insured (either inside "house" counsel or outside
"panel" counsel), monitor litigation that may take years to complete, and appear in person or
over the telephone with settlement authority at a mandatory settlement conference when
requested by the judge.
If a claims adjuster suspects under-insurance, the condition of average may come into play to
limit the insurance company's exposure.
In managing the claims handling function, insurers seek to balance the elements of customer
satisfaction, administrative handling expenses, and claims overpayment leakages. As part of this
balancing act, fraudulent insurance practices are a major business risk that must be managed and
overcome. Disputes between insurers and insureds over the validity of claims or claims handling
practices occasionally escalate into litigation (see insurance bad faith).
Insurers will often use insurance agents to initially market or underwrite their customers. Agents
can be captive, meaning they write only for one company, or independent, meaning that they can
issue policies from several companies.
Commissions to agents represent a significant portion of an insurance cost and insurers such as
State Farm that sell policies directly via mass marketing campaigns can offer lower prices. The
existence and success of companies using insurance agents (with higher prices) is likely due to
improved and personalized service